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Who else is investing in this round?

Paul Graham just wrote a very interesting post on why YC startups are seeing more and more convertible notes instead of straight equity financing where the valuation is set up front. 

First to be crystal clear, I’m a big fan of Paul and Jessica and the program they built. I use YC portfolio products every day (ie disqus, dropbox, bump, etc) and we invested in omgpop which also came out of YC. I hope we make more investments in YC companies. And I was crushed when YC decided to leave Cambridge a few years back

Second, at our firm, the vast majority of seed and series a financing we do are based on a set cap table and valuation and we have also done a convertible note rounds too. But the latter is in the minority. Fred Wilson has a great explanation why he prefers setting a valuation and sums up the rationale quite nicely.

Anyway, back to Paul’s post. 

The one thing that stood out in particular in his post was this line:

By far the biggest influence on investors’ opinions of a startup is the opinion of other investors. There are very, very few who simply decide for themselves. Any startup founder can tell you the most common question they hear from investors is not about the founders or the product, but “who else is investing?”

Yuck. That’s not good.

I have never asked a founder who else is going to invest to help me with my decision.

Actually, I take that back and want to clarify. I rarely if ever ask the founder that question. In the rare occasions I do ask the founder (and it’s super rare) it’s because a) I want to make sure they aren’t working with an investor I don’t like or b) if they want our help bringing in other investors we do like.

But we also tell the founders that we can also do the entire seed round ourselves too.

I wouldn’t know how to do it differently.